Audio 4:44
What happens when the middle class falls?

Stephen LongUpdated
Tue Oct 22 19:24:00 EST 2013

In the United States, the collapse of middle class incomes and the growth of low-paid jobs without benefits has become a major political and economic issue. Adjusted for inflation, the median income of a full-time male worker is no higher than it was 40 years ago. So, when the middle class falls, what happens to the working poor?

Transcript

DAVID MARK: In the United States, the collapse of middle class incomes and the growth of low-paid jobs without benefits has become a major political and economic issue.

Adjusted for inflation, the median income of a full-time male worker is no higher now than it was 40 years ago.

So, when the middle class falls, what happens to the working poor?

Economics correspondent Stephen Long recently toured the US looking at these issues. He filed this story for PM.

STEPHEN LONG: Six PM, and Juan Becerra is off to work.

He's been three years at Walmart, the world's biggest retailer, the world's biggest private employer, working in a store in the San Gabriel Valley outside Los Angeles.

His wage has just risen from $8.40 an hour to $9.20.

JUAN BECERRA: I'm making $500 every two weeks. And that's on a good cheque, that's not even, that's a high cheque. On a regular cheque, it's like about 430 every two weeks.

STEPHEN LONG: It's a poverty-level wage. He's supporting a wife and three kids on that money. And Juan Becerra is just one of many. Since the great recession, the ranks of America's working underclass has swelled.

The middle class is collapsing. The American dream of social mobility is broken.

JOSEPH STIGLITZ: The recession is not over for most Americans. Most Americans have basically seen their incomes stagnate or fall since 2008.

JOSEPH STIGLITZ: In fact, if you look in the middle, the average, typical American median income of a full time male worker today is lower than what it was 40 years ago.

STEPHEN LONG: In the richest country in the world, vast numbers are working full time and living in poverty.

MARY GATTA: Close to 50 per cent of Americans are working and are economically insecure.

STEPHEN LONG: Dr Mary Gatta at Ruttgers University in New Jersey has spent her career researching the plight of the low paid.

MARY GATTA: They can't afford their housing, their healthcare, their childcare, their transportation. They can do no saving for an emergency or their own retirement.

Half of the country lives in economic insecurity.

STEPHEN LONG: Like many millions of US citizens, the Becerras rely on food stamps provided by the government to feed their children. The family used to live in a two bedroom apartment. Then Juan's wife, Ariana, had to quit her job. She got carpel tunnel syndrome from carrying heavy trays for long hours working in a diner.

Unable to pay the rent on one income, the Becerras had to leave their two bedroom home. Now the family of five all sleep in a single room.

STEPHEN LONG: Amid the complaints about high wages and penalty rates in Australia, it's worth considering the alternative. In the US, outside a diminishing core of career jobs, there's no sick leave, no holidays, no penalty rates, no overtime rates, no superannuation and no health cover in a society where medical aid is prohibitively expensive.

The federal minimum wage in the US is $7.25 an hour, but for restaurant and bar staff, it's even lower - just $2.13. It's tips or starve.

Dr Mary Gatta.

MARY GATTA: When you think about what you're actually earning, you have no idea. When you go to work that day, you don't know what you're going to end up with. It could be busy and you could make some tips, or you could be sitting around for hours and just earning 2.13 an hour.

STEPHEN LONG: But wages are only one issue.

MARY GATTA: Sometimes workers are scheduled like a 12 BD, so that means they stay til business declines. So it can decline a couple hours after you get in, or 12 hours after you get in.

STEPHEN LONG: In the retail industry as well, a growing number of workers are hired on contracts that only guarantee them work until business declines. Many workers can be sent home without pay at any time, yet they're contractually obliged to be available for 40 hours work a week.

And it's these low paid jobs without benefits that are growing.

JOSEPH STIGLITZ: Well America's becoming a rich country with poor people. That's the irony.

DAVID MARK: Stephen Long prepared that report and there'll be more on that story on Foreign Correspondent tonight on ABC.